FCC Orders Title II Reclassification of Broadband Internet

By a 3-2 vote Thursday, the Federal Communications Commission has begun proceedings to adopt a new set of rules designed to give regulators greater authority in mandating how broadband Internet services can be classified and delivered by service providers.

“There are three simple keys to our broadband future,” said FCC Chairman Tom Wheeler in a public statement Thursday [PDF]. “Broadband networks must be fast. Broadband networks must be fair. Broadband networks must be open.”

Democrats on the Commission voted to follow President Obama’s suggestions on the net neutrality issue last November. On a party line vote, the FCC is ordering that broadband Internet service will be treated as a telecommunications service rather than an information service, as the law presently defines those terms.

That change in classification would, at least theoretically, permit the FCC to enforce mandates on how ISPs deliver broadband Internet service to their customers, as well as what measures ISPs will not be allowed to take to manage that service.

Under the terms of the Telecommunications Act of 1934, as amended in 1996, the FCC’s authority to determine so-called common carrier requirements only apply to telecommunications services such as long distance telephone.

After the FCC ordered Verizon to stop using unreasonable network management techniques deemed unfair to customers, a federal appeals court ruled in January 2014 that it could not apply Title II regulations to what the FCC had already classified a Title I service.

More About Title II

The actual text of the Open Internet order has yet to be released by the FCC at press time. However, as the Commission made clear in a public statement Thursday, broadband Internet service (as opposed to dial-up) will now be considered alongside long distance, except for certain technical distinctions. Those distinctions will allow the FCC to allow forbearance from enforcing long distance regulations that don’t actually apply to the Internet.

Over the past year of debate, there had been considerable skepticism about the Commission’s ability to apply 1930s law to 1990s technology. In his statement Thursday, Chairman Wheeler blasted those skeptics, saying, “We have heard endless repetition of the talking point that ‘Title II is old-style, 1930’s monopoly regulation.’ It’s a good sound bite, but it is misleading when used to describe the modernized version of Title II in this Order.”

One of those skeptics was probably Senate Majority Leader Mitch McConnell (R – Ky.) who issued this statement prior to the FCC’s vote Thursday morning: “The Obama Administration needs to get beyond its 1930s rotary-telephone mindset and embrace the future. That means encouraging innovation, not suffocating it under the weight of an outdated bureaucracy and poorly named regulations like this one.”

Demonstrating his willingness to test McConnell’s mettle, Wheeler suggested that the selective application of Title II regulation to broadband was, in effect, a “modernization” of Title II itself. This suggestion in itself carries no legal standing, though it could give opponents in Congress — as well as skeptical judges whom we’re certain to meet soon — reason to consider whether the FCC believes it is applying communications law in a way other than Congress intended, either in 1934 or 1996.

Supporters of reclassification have argued that the FCC’s application of Title I to broadband Internet actually came after it had previously classified Internet service under Title II, including during the last official modernization of the Telecom Act in 1996.

In a note to CMSWire Thursday, Earl Comstock, former CEO of the COMPTEL trade organization and a staffer to Sen. Ted Stevens (R – Alaska) during the 1996 Act’s passage, said, “The FCC has finally recognized what Congress did back in 1996: that Internet access is the ‘on-ramp’ to the information superhighway that the 1996 Act considered a telecommunications service.” Comstock is presently a practicing legislative affairs attorney with the law firm Eckert Seamans Cherin & Mellott, LLC.

Concerted Opposition

Today’s order is certain to face legal challenges, including from telcos AT&T and Verizon, which are already on the record as having prepared to mount strong opposition when this day arrives. Such challenges could prompt judges to issue stays of enforcement, with the possible aim of suspending these rules until the end of the current administration.

Last November, counsel for Verizon argued that the FCC’s goal of enforcing net neutrality and its simultaneous goal of eliminating paid prioritization deals between carriers and content providers, are in conflict with one another.

It’s these interconnection agreements, the telco argued, that enable high volume content such as video to be processed through faster routes, so that streaming media is delivered at the speeds customers expect. Nullify these deals, said Verizon, and the Internet would suddenly get a lot slower.

“Regulation of interconnection agreements would only cripple this flexible, market-based dynamic that has played a key role in the explosive growth of the Internet,” wrote Verizon associate general counsel William H. Johnson, in a letter to the FCC. The general counsel went on to argue that any sudden mandate for ISPs to report on their service levels, to meet the common carrier requirements of Title II, would violate the due process mandate of Title II itself.

Furthermore, existing common carrier laws require that communications service providers maintain minimum service levels for all customers, and that any service quality offered at a premium must be offered to all customers, not an exclusive set.

Opponents of reclassification, including telcos, have argued that it would be impossible for ISPs to comply with such mandates while, at the same time, refraining from applying the network management techniques necessary to attain those levels — techniques which Chairman Wheeler’s statement today implies he may still find “unreasonable.”

AT&T CEO Randall Stephenson, speaking at a public event last November, raised the specter of his telco suspending all broadband build-outs nationwide, until at least the end of the Obama administration — because any final court decision on the issue, probably from the Supreme Court, would come after 2016. Of course, in such a case, AT&T and Verizon would be among the likely plaintiffs.

Is the Cloud a Title II Service?

The FCC’s decision to change its view of the Internet into a telecom service comes, quite ironically, during a time in the evolutionary history of the medium where it is arguably more of an information service than ever before.

Under current US law, information is an asset, whereas communication is speech. The laws protecting what a business can own and what it can say are quite distinct. Congress has yet to craft a law that adequately defines “privacy” with respect to the exchange of information over a network, and probably won’t do so this term.

But when such a law is eventually passed, it could give judges a clearer idea as to whether Congress considers the contents of Internet communication as property or speech, and which protections should apply. If, for example, intellectual property laws are strengthened, a judge could find that Congress intended for the exchange medium for that property to be protected under Title I after all — an argument the FCC itself was making up until last year.

Today, the Internet is the transmission medium for interconnected servers throughout the world’s data centers. It’s difficult to dispute that cloud-enabled networks are the greatest information systems ever devised.

For regulators to begin treating these systems as communications networks now could completely re-cast the legal interpretation of everything a business does online, including soliciting business from a customer, taking payments, providing a publication and teleconferencing.

In his statement, Chairman Wheeler promised that the obvious implication of this re-casting — taxation — would not apply to such transactions due to forbearance, or what he called “modernization” of Title II. Telcos and ISPs will inevitably ask why such “modernization” does not apply to conducting the same business over the telephone.

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